Notes on “How Brands Grow”
I took notes while reading a book called “How brands grow: what marketers don’t know” by Byron Sharp and here they are. Enjoy!
Disclaimer: these are my own notes and my own understanding and interpretations of the book. I could be wrong. Please comment or reach out to discuss if anything. If any chapter or note is interesting, I would recommend you to read the book to know more details as the book has a lot of data, graphs and case studies.
Chapter 1 and 2: Growth
Sales = users x frequency.
Double jeopardy law — more users will lead to more frequency and hence more sales. People are driven by habits. Hard to change habit and frequency for most products but can find more users and grow. (e.g. Most people only shower once a day. If they buy 4 shower gels a year, it is the limit. We is harder to ask them to shower 3 times a day to buy 12 shower gels than find 2 more people to buy into the brand).
Advertising works best when it tells us things we already believe. It should refresh existing memories but not build totally new ideas and memories. (eg. baking soda based cleaning products do the job but sales flat.)
To increase sale — win market share (users) OR enter new markets (users again). Cross sell is not a route to huge sales (success). Why? Still double jeopardy law. Cross sell is selling your customers. Remember growth comes from new customers.
Chapter 3: How to grow your customer base?
Retention vs Acquisition. It is natural to lose some customers and gain some every year. The key is to lose less than industry average and gain more than industry standard. Every year people switch brands for different reasons (getting richer, poorer, happier, sadder, in love, out of love, etc). It has higher chance to offer / acquire those switchers than grabbing old customers. Not to say we don’t care old customers but remember acquisition is the driver for growth.
Chapter 4: Which customer matters most?
“Difficulty lies not in the new ideas but in escaping the old ones.” Table 4.1 is the best example. Case study — Coca Cola. 50% of their users bought 2 or 1 can of Coke a year. 30% of their users bought less than 1 can of Coke in a year. It is 80%! Those heavy users who bought Coke more than 12 cans are very small amount. Law of buyer moderation means buying pattern will move to mean overtime. Light buyer will become heavy buyers. Heavy buyers will become light. Hence, should not neglect light buyers. Successful marketing advertising acquires many many light buyers.
Chapter 5: Our buyers are different
Behaviour is a powerful driver of awareness, perceptions and attitudes. Buyers are the same across industry. Their customer is my customer too. Those who eat KFC is potential buyer for Lotteria. Hence, buyers are not different. Hence chapter 6.
Chapter 6: Brands share customer
Who do you compete with? (My understanding is we compete with everyone for mental and financial wallet share.) Duplicate of purchase: all brands within a category share their customer base with other brands in line with the size of those other brands. Everyone shares a lot with big brands and a little with small brands. (eg. people buy different brands of drinks and chips. Big brands share some of their customers with small brands. However, some customers from small brands will also share with big brands.)
product feature =!= buying behaviour.
Managers tend to define narrow groups to claim leader in the group. Niche market. It means lower growth. It is false security. Target all different buyers.
Chapter 7: Passionate customer commitment
Familiarity breed liking. Usage breed familiarity & brand knowledge. Hence liking. There is no Brand Loyalty (big announcement!). People are polygamous loyalty. Buying is not random. It shows clear behavioural preference & loyalty.
Natural Monopoly Law — large brands have a monopoly on light buyers.
Loyalty is divided & strongly drive by opportunity. Connection to brand is important. Customer advocacy — not old passionate users but new users who discover coz of new information.
Chapter 8: Differentiation vs Distinctiveness
Differentiation is meaningful. Distinctiveness is meaningless. However, brands lasts, differentiation doesn’t because of copy. A brand is more likely to be perceived as the only brand with a particular quality if it has few competition. Ads can work effectively without USP or as a mean of persuasion.
How buyers choose? It is not essential for marketers to convince buyers that a product is different before they buy it. Then what is essential? Distinctiveness is an alternative perspective. A distinctive asset is anything that shows people what a brand is being offered for sale. It reinforces memory structure to identify the brand.
2 Criteria for branding asset.
1. Fame — consistency time / media.
2. Unique — It is not USP. It is more of trying to find unique identifying characteristics.
Asset — motivates — user — buy (This is not the case)
Asset — user — recognise — buy — loyalty
Chapter 9: How ads really work?
Ad is to increase the chance to buy. It should refresh / build memory structure. It should make people to remember in buying time (this is important).
Ads — Memory
Reach is important. Continuous is more important / better than gaps. Memory decays.
Ads — processed — memory structure.
Emotion is the primary source of human behaviour. Memories is the link between ad and brand choice. Ads build mental availability. Memory — what does it do? what it look like? where is it available? when and where it is consumed? by who and with whom?
Ads has 3 main functions.
1. persuasion to change opinion.
2. mental availability (refresh and build meaning)
3. bond, status signal, priming
Less known functions — people think good ad = good product. Good ads make its users cool.
Chapter 10: What price promotion really do?
People buy from different price level/range. Hence no particular “low price” buyer. Why should you do price promotion? Only to clear stock, retail pressure. It can see immediate but no long term effect. Because price promotion doesn’t win new customers. It only attract infrequent buyer to buy. It is not very bad if not very frequent.
Elasticity = sale increase / price cut = 20% increase / 10% discount = -2 (minus because price cut)
5 factors to bigger price elasticity.
1. price move past local reference price
2. explicity signal
3. if the brand’s market share is low.
4. if price is increase — people see loss, hence act more.
5. if price is close to average of other brands
Future full price buyers will buy now. Need more sales to cover the loss from the discount. Competitors may cut price and will lead to price war. Not good for industry. Promotions — no long term effect. Advertising — reach and has long term effect.
Chapter 11: Why loyalty program didn’t work?
Loyalty may increase but the brand’s market share won’t grow. Table 11.2 is gold. Low impact because it rewards existing buyers for what they are already doing. It is good only for learning and need analysis of user data.
Chapter 12: Mental and Physical Availability
The key marketing task is to make a brand always easy to buy for every buyer. Buyers are busy and hence screen out a lot of brands by default. Buyers don’t evaluate. They use more subconscious process.
The big marketing issue is how to build mental availability in time of “thought of in buying”. Get people to think of your brand when they are in buying stage.
Mental availability — memory — nodes — links
Brands’ marketing should refresh and develop the memories. Quality + Quantity is important. The more quality marketing ad strengthen the links with situations and the brands in relevant time and situations.
Physical availability — as easy to notice & buy as possible because there is no loyalty. How marketing can help? It should reduce the reasons not to buy. (eg. McDonald, KFC).
Never lose sight of the big picture. Marketing is always to get mental and physical availability.
Chapter 13: Scientific Laws
Lists of laws and followed by Q&A.
Summary
Never lose sight of the big picture. Marketing is always to get mental and physical availability. Marketing is always for growth. Beware of double jeopardy law. Sales = Users x Frequency (habit). Hard to change habit. Get more market shares.
Happy growing!
References:
https://www.amazon.com/How-Brands-Grow-What-Marketers/dp/1511383933
